Are Green Businesses Still Golden?

I don’t know about you, but I’m starting to get the feeling that the excitement surrounding the green business movement is starting to lose its luster.

Before I share some of the reasons why, read The State of Green Business from Kelly Spors, as it will help set the table for this post. While Kelly’s report paints a mostly positive picture about green business, I’ve been noticing a few hiccups as of late, including;

Solyndra - this was the solar panel manufacturer based in California that declared bankruptcy last August. Now, Solyndra is not the first solar panel company to declare bankruptcy, but it’s the one that has garnered most of the publicity. That’s because US taxpayers helped fund it through loan guarantees that were part of the 2009 stimulus package.

According to an article in The New York Times, taxpayers may end up being on the hook for almost a half a billion dollars. Solar panel manufacturers and sellers probably didn’t see too much of an uptick in business in the days and weeks following the Solyndra news.

Chevy Volt - General Motors is shutting down the Detroit plant that produces the $40,000 Chevy Volt for 5 weeks. Currently, supply is exceeding demand, so GM has decided to allow the two to catch up with each other.

Some say that Volt sales are slow because of the $40,000 price tag. Some say that it’s a combination of price and plug-in. The bottom line; US consumers aren’t flocking to showrooms to buy electric automobiles.

Rapioli - One would think that a huge forward-thinking company like Apple would be interested in reusable plastic shipping packaging that can be used to ship its products all over the world and back, but so far interest in Rapioli has been tepid. This environmentally friendly, patent-pending product was first recognized for its innovation by the EPA, and was awarded a grant from the California Department of Conservation, Division of Recycling.

Toyota made a commitment to test the product, because it was in line with their zero-waste mission, but nothing came out of it; they didn’t buy Rapioli. It can be quite a challenge to convince a huge company to buy a cutting-edge green product.

The Green Franchise Sector - When the green business movement started to gain traction, a few franchise concepts started to appear that capitalized on things like green energy and the use of environmentally-friendly products.

The first green franchises that appeared were of the solar variety. The franchisors that set these new concepts into motion were based on the west coast of the United States, and most of the people that invested in solar franchises set their businesses up in places like California, Nevada and Arizona. One of the main reasons for these locations being first on the grid was the fact that there were, (and still are) financial incentives from the government for homeowners that had solar panels installed. That’s since changed, and for the better, as you’ll see on this Database of State Incentives For Renewables And Efficiency.

While it’s great to see more states offering subsidies to homeowners that convert their homes to solar energy, the up-front cost is still out of reach for most people. (Approximately $30,000) We’ll have to wait and see if the interest in solar energy remains strong, but more importantly, we’ll need to find out if wallets will actually start opening for solar panel installs.

I Believe

I’ll admit it; I get energized about the possibilities surrounding all things green. I like seeing an occasional wind turbine spinning silently along my local freeways. Once in a while, I see a house that has an array of solar panels set up, and it’s a good feeling to know that a few residents have taken it upon themselves to move towards energy independence.

It’s also a good feeling to learn that a number of small businesses have started to focus on sustainable practices. But, will more small businesses move in the green direction? And, can they?

I’d like to think so, but I’m not so sure. A lot of small businesses have had to downsize their workforces, and scale back on things like inventory, and operating hours. As the US economy continues to rebound, will small business owners be thinking about how to go green? Or will they be thinking about how to make up for lost time, and focus on increasing profits?

Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

You highlight some very interesting examples that do make one question whether green business has gained as much traction as the buzz suggests. There are a couple things I’d like to point out:

1) “Green” is a secondary purchasing concern. Very few consumers buy things just because they’re environmentally friendly. You point out the Chevy Volt’s tepid sales. The $40,000 price tag and the complications of having to charge an electric battery every 300 miles are sure to deflate consumer enthusiasm, especially in today’s cost-conscious economy. EV technology still feels unproven. However, the eco-friendly Toyota Prius, which runs on gas and retails for about $25,000, continues to be a big seller. (http://blogs.wsj.com/drivers-seat/2012/03/05/does-toyota-prius-story-give-hope-to-chevy-volt/)

2) There’s a difference between a “green business” and sustainable business practices. Green businesses are those that market themselves to consumers as the eco-friendly alternative. It could be a green cleaning service, a green clothing boutique, etc. But what’s happened is that many mainstream businesses and big corporations have adopted sustainable business practices and started marketing “green” products, so there’s less need for consumers to seek out exclusively “green businesses.” Example: If Merry Maids starts promoting that it uses eco-friendly cleaning products (http://www.merrymaids.com/181/clean-green), there’s less reason for consumers to use a “green” cleaning service.

May I?
I would say focus on offering a feasible product and market it accordingly. Your product is not better than the “green labeled product offered by the big corporation” just because it’s “green” but because your customers will be protected from health damages usually induced by using chemical cleaning (especially on kids!), because you can prove and guarantee the quality of your product (unlike those corporations!), because you offer an extra customer-friendly service to accompany your products, because your products come with a unique design etc.
Focus on what your product can really do for the client, see how you can evidentiate yourself from the corporations, see why your products are better (because in most case I can assure you that small, really ethically driven companies DO offer better products!).
What do you think?

Thanks for commenting. You’re observations on the all things green are admirable.

My brother-in-law is a Toyota dealer, so I know first-hand how well the Prius does. And, for around $25k, it is a good value. The Volt–isn’t. GM blew it with it’s $40k+ price tag, and it was predicted way ahead of time that the care wouldn’t sell very well because of it.

They actually have a green-certified process, and market it heavily. They were the 1st residential cleaning franchise to jump on the green thing, and they do a great job.

Kelly, it’s about the money. In a tight economy, lots of people are just trying to figure out how to stay ahead on a monthly basis. Spending 20-30% more on sustainable products and services–green things, aren’t a priority, currently.

As things turn around, I predict that more consumers…more small businesses, will invest more to help our planet.

Hi Joel,
I certainly agree with you about the cost pressures on small businesses today – especially businesses that want to adopt a green business model or install high-cost energy-efficient equipment/solar panels, etc. (I think there’s less of a cost hurdle for being sustainable when you’re starting a business from scratch.) But there are plenty of “green” things businesses can do that cost little, and even save money:
– Sell and encourage use of reusable shopping bags
– Recycle more paper and office waste
– Install programmable thermostats
– Put motion sensors on restroom and storage closet lights
– Reduce packaging in general
Also, I think the comment that consumers today aren’t willing to pay a premium for green products and services is overly generalized. Consumers DO pay a premium for the Toyota Prius (a sub-compact car), assuming they’ll save gas money down the road. Consumers are spending money on organic foods like never before, and the sustainable agriculture/foods industry is growing rapidly right now.
It comes down to priorities and perceived value. When the economy is tight, consumers have to decide what they’re willing to spend extra money on and what they’re not.
Thanks for the thought-provoking discussion! I always enjoy your posts.
Kelly

I think for today’s small businesses focusing on ‘going green’ is only one potential priority in our current economic times because, as you state in your article Joel, most business owners need a multi-pronged customer service and marketing strategy as they work to keep their businesses profitable.

As an environmentally conscious maid services franchisor, we’ve experienced ongoing success not only because we are ‘green’ but also because we provide a valuable and high quality service for busy working families.

When we asked our customers what they look for in a residential cleaning service they told us they want an affordable, reliable, personalized service that provides them with a clean and healthy home for their families.

Despite the fact that we use the most environmentally sound cleaning products and processes that are safer for our customers and the environment, being ‘green’ isn’t the only reason our customers hire us.

Make no mistake, Maid Brigade believes in and supports the green movement. But we also understand our customers’ motivations for using a house cleaning service and we are constantly looking to better understand what our customers want to focus our business offerings on these factors as well the healthy home. Like in any aspect of business, a singular focus is generally not as effective as a strategy that puts the desires of the customers up front and holds strong to a solid company mission. Businesses that think ‘green’ and put customer service at the top of the list of must haves will rise above their competitors.

Small businesses can and should stick to the concept of “going green”. But not because going green is just an other trend that they should follow, but because in the long run this is what businesses will turn up to anyways. And eary adopters will always have an advantage
Now, many of the issues you have pointed out to are not necessarily because people would not like / want / buy green products, but because many of those quoted above companies did not give it a thorough thought and bothered to write a feasible business and marketing plan.

Now honestly … what to do with an electric car if there’s no proper charging network in place? These things have to go hand in hand, and maybe before offering such a car to the great public, Chevy should have tried to close some deals with municipalities for ex to promote the so-called green cities. Electric-powered public transportation for example? If Detroit would have said: we will build that network and encourage all taxi-drivers to switch to electric cars, that would have made some more sense, isn’t it?

We bet the concept will end up being successful in Japan, Korea etc. – there where the innovation came from … (once again …)
or in Europe where you can already hear about initiatives like rent-an-electric car or share-an-electric-car and where governments and municipalities really get involved.

No need to despair – employ the right strategy and it will all work out like a charm

About the Volt; it goes more to the cost of entry, than the fact that there aren’t charging stations. If I was the CEO of GM, I would wait and see how things went until I started approaching municipalities, as you suggested. (great idea, by the way)

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